IMF’s Extended Fund Facility IMF approves US $105.63 million extended arrangement for Seychelles |03 August 2021
The executive board of the International Monetary Fund has approved a 32-month extended arrangement under the Extended Fund Facility for Seychelles for SDR 74 million (US$105.63 million), or 323 percent of Seychelles’ quota.
The board’s approval allows for an immediate disbursement equivalent to US$ 34.26 million.
The decision was taken on Thursday July 29, 2021.
Seychelles was hit hard by the Covid-19 crisis and the authorities reacted swiftly, by locking down the economy, thereby keeping infection and fatality rates low. However, the travel restrictions and global economic downturn triggered unprecedented economic contraction. The authorities responded with measures to mitigate the economic fallout on businesses and households. But the public debt ratio increased sharply, reflecting the primary balance deterioration, exchange rate depreciation, and gross domestic products (GDP) contraction.
As soon as vaccines became available, Seychelles led the world in vaccination coverage and reopened its borders on March 25, 2021. With tourist arrivals bouncing back, a V-shaped recovery is now expected.
The key objective of the proposed programme is to support the authorities’ efforts to restore macroeconomic stability and debt sustainability while strengthening the post Covid-19 recovery. The programme would support the authorities’ ambitious fiscal consolidation efforts and reduce debt sustainability risks through a three-pillared, frontloaded adjustment comprising fiscal adjustment, a liability management operation (LMO), and external support. The authorities successfully completed the LMO, which seeks to significantly reduce the roll-over risks, immediately after the conclusion of the programme discussions.
At the conclusion of the executive board’s discussion, Tao Zhang, deputy managing director and chair of International Monetary Fund (IMF) stated:
“The Seychelles’ economic outlook is positive, but risks remain high. Tourist arrivals since March 2021 point to a strong recovery. Nonetheless, the outlook is uncertain and contingent on the pandemic path, the effective rollout of vaccines in Seychelles’ key tourist markets, and the expected recovery in external demand.
“The new arrangement under the Extended Fund Facility will support Seychelles’ post-pandemic recovery, anchor reform implementation and catalyse additional external financing.”
He added: “The key strategy focuses on maintaining the recovery momentum while reducing the risks to debt sustainability. Advancing the reform agenda through an ambitious fiscal adjustment, reinforced debt management, strengthened fiscal governance frameworks, and financial sector development and inclusion are essential priorities to sustain the post-Covid-19 recovery and generate high, sustainable, and inclusive growth.
“Enhancing public financial debt management, and improving governance of state-owned enterprises, will reduce fiscal vulnerabilities. Modernising and revamping the banking resolution and emergency liquidity assistance frameworks will help safeguard financial stability. Further reforms to modernise the financial sector, including through digital finance, and improve the business environment will help support private sector development and foster sustainable and inclusive growth. The capacity development strategy aligned with the programme is an important tool to achieve reform potential.”
Press release from the IMF